How to Invest Small Amounts of Money

Most people believe that they need to have a lot of money to make an investment. The truth is, strong and well performing portfolios can be built on the foundations of just a few hundred dollars.

If you are not looking to take big market risks, small amounts of money are best invested in a certificate of deposit (CD) from a bank or lender. You can also buy short-term Treasury bills, which are available online. These options don’t offer tremendous growth, but they are also low-risk which makes them particularly palatable for those not looking to do anything too wild. It is also a good way to grow your nest egg. That way you will have more cash available to make bigger investments in the future.

For those with a bit more risk-tolerance, dividend reinvestment plan (DRIP) are a good way to go. This option creates a cyclical set up in which you buy shares of stock, and then the dividends are automatically used to buy more shares. The shares are bought at discounted prices and with no brokerage fees. Another small-scale investment option is an exchange-traded fund (ETF). These almost always do not have a minimum investment amount and there are few ongoing maintenance fees. But there is a downside: fees are incurred per transaction, which means that repeated investments can get pricey.

Nowadays there are many peer lending platforms, also known as crowdfunding, that can be interesting for those looking to take big(ger) risks. By making investments (of any size) in an entrepreneurial project, you have a stake in that innovation. When it comes time to repaying the loans, you will receive a share of the interest, proportional to the amount you originally invested. Some of these platforms have minimal investment amounts. They are also considered high risk, as a majority or ventures fail. But for those that do succeed, there are prospects for high earnings. On average, returns are between 5% to 8%; some reach as high as 30%.

Regardless of how much you have to invest, and how knowledgeable you are in the investment world, the basics are simple: make smart choices with whatever resources you have. Like almost anything else in life, the hardest part of investing is taking the initial step. But also like most of life’s occurrences, the sooner you get started, the sooner you can start making money.

Written by

Vadim Belyaev is an experienced investor, banker, financier, media manager, and philanthropist, and is recognized as a leading Russian businessman.

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